I HOLD THIS TRUTH TO BE SELF-EVIDENT, THAT A DEBT CRISIS CANNOT BE RESOLVED WITH MORE DEBT

Tuesday, February 19, 2008

Fidel, The Black Swan

When Fidel Castro threw out the corrupt Batista regime in Cuba (i.e. our bastards) President Dwight Eisenhower said that we should not worry about him much because he would be gone soon. Fifty years and ten Presidents later (six of whom are already dead), Fidel finally decided to step down. As Nicholas Taleb would say, he is a Black Swan.

Fidel: The Political Black Swan

What's the moral of the story? NEVER underestimate what looks like a "contained" situation. Like the subprime crisis.. which begat the credit crunch.. which begat the slowdown.. which begat (?) the recession.. which may beget much worse and for a much longer period of time than conventional wisdom currently expects.

Drop the embargo and neocolonialism (along with a few 'we have returned' gusanos) will surge between every undefended grain of sand. No doubt the next U.S. president will be a facilitator as will the whole generation of Cubans that has no real awareness of earlier conditions.

Except for a very few exceptions, 99.5% of people will always find the answer they are looking for. The exceptions stumble on the answer while the others already have the answers in their mind. They just need an evidence.

I believe Taleb would call Castro a "gray swan". A "black swan" is an outlier, carries an extreme impact, and is explainable only after the fact. A "gray swan" is all of the above but is also somewhat predictable prior to the event. The Castro event is clearly an outlier and carries a potentially extreme impact but considering the finite nature of humans and Castro’s health problems, it was somewhat inevitable (thus predictable) that at some point that he would hang them up (or die). Timing is a whole other issue and nobody could predict the timing of this event. Just thought the clarification between black and gray swans was worth making.

Hey, if Castro hadn't taken over the mob's Cuban casino business, Nevada would still be full of cows, Coke would still be full of sugar instead of Archer Daniels Midland High Fructose Corn Syrup, and the Cuban health care system would be more like that in the USA.

About Me

I was educated as a chemical engineer but spent almost my entire career in finance, particularly in money, FX and bond markets. The name stands for Hell-as-IOUs and the picture points to Quixotic endeavors.